An audit by the Inspector General’s Office of the U.S. Housing and Urban Development Department found that the V.I. Housing Finance Authority, the semiautonomous agency tasked with managing $2 billion in federal disaster recovery and mitigation grants, “does not have fraud risk management processes to prevent and detect fraud risks.”
“We assessed VIHFA’s fraud risk management program maturity at or below the lowest desired goal state … because some anti-fraud activities were disorganized, uncontrolled, and reactive, while other anti-fraud activities expected in a fraud risk management program were absent altogether,” according to a summary in the report.
Five points highlighted by auditors included: the agency’s lack of an overall fraud management framework or entity dedicated to managing fraud risk; VIHFA’s failure to implement fraud-specific control activities; lack of monitoring or evaluation of the agency’s anti-fraud activities; lack of “setting an anti-fraud tone by management, even after” the indictment of former Chief Operating Officer Darin Richardson; and a lack of involvement from all levels in the organization in protecting disaster recovery and mitigation funds.
“Until VIHFA implements a fraud risk management framework, there remains a high risk that fraud may continue to occur or go undetected and jeopardize the integrity of its programs and compliance with federal requirements,” the report warned. “As a result, this will leave nearly $2 billion disaster recovery and mitigation funds at risk.”
VIHFA officials did not respond to emailed questions from the Source by Wednesday evening.
The audit zeroed in on several areas of concern, including a “culture” at the agency that “does not promote an anti-fraud environment.” The report cited a 2023 questionnaire conducted by VIHFA’s internal audit division, which found that employees had personal knowledge of fraud or suspected fraud, knew of instances where the agency’s management had overridden fraud controls, and were aware of “motives, pressures, and (or) incentives within the organization that would make someone susceptible to committing fraud.”
“Despite the gravity of the information received, these results were not acted upon to mitigate fraud risks when it was public knowledge fraud had potentially occurred at VIHFA,” according to the report. “Instead of conducting an investigation and sharing the alarming questionnaire results with VIHFA’s management team, especially the Executive Director, the Internal Audit Division shared the information exclusively with the Procurement Division and the Finance Unit directors, who are no longer employed by VIHFA and appear to have taken no action to elevate or address the matter.”
VIHFA officials who were interviewed by auditors said they had no knowledge of the questionnaire or its results, according to the report.
